Can More Money Solve Your Financial Problems?

by Ryan Guina

How much money do you need to be happy? According to a study performed by Princeton economists, the ideal income for personal satisfaction is $75,000. Of course, other studies have shown that people consistently believe that they would be happier if they earned 20% more than their current salary. So in an ideal world, the person earning $40,000 would earn $50,o00, the person earning $60,000 would earn $72,000, etc.

Regardless of your ideal income, one thing is certain – most people believe they could solve their money problems and be happier if they just had more money. Life would be easier, the grass greener, the roses sweeter smelling, and the dishes would wash themselves.

Unfortunately, this belief can be misleading because many people mistakenly blame their income for their money problems. Believing more money would solve financial problems also fails to account for lifestyle inflation. How long would it take before that 20% increase in your income became ingrained into your lifestyle? And when it did, would you again feel the need to increase your income by 20% in order to feel happy or secure?

More Money Does Not Solve All Money Problems

More money is not the solution. It can be a solution. But it is not the solution. Too many people look at having more money as a panacea, a cure-all for whatever financial problem(s) they may have. But that is a dangerous way of thinking because it makes money the entire solution when it is only part of the equation.

To be clear, having more money can be helpful. But it doesn’t take much to realize that having more money won’t solve all of life’s financial problems. Even becoming wealthy isn’t the answer to life’s money problems. Newspaper archives are full of stories of lottery winners who were bankrupt within a few years. Many lottery winners claim their lives were worse after they won the lottery. Take a look at the hundreds of famous athletes, musicians, and movie stars have let millions of dollars slip through their fingers and later filed bankruptcy or otherwise suffered financial ruin. Even the self-proclaimed billionaire Donald Trump has filed for bankruptcy. What went wrong?

How Do You Solve Money Problems?

Many people like to zero in on dollars and cents, but there is more to the story than your salary. I will almost go so far as to say that your salary doesn’t matter. It does, but probably not as much as you think.

Regardless of how much money you earn, the only way to become financially stable is to spend less than you earn, or as I like to say, to earn more than you spend. There is no other way to financial health. You can’t be financially stable when everything that comes in immediately goes out the door, and you certainly can’t become financially stable when your obligations outpace your income.

Focus on how you manage your money, not how much you earn. Increasing your income is a step in the right direction, and I recommend it to anyone seeking to improve his or her financial situation. But even millionaires need to budget. Increasing your income alone can’t solve your money problems; you need to change your actions and learn to control your spending habits.

Live within your means. If I could teach one financial concept to everyone, this would be it. Living within your means is the most important financial concept there is – master this step, and you are one your way to financial prosperity. Get current on all your bills, emphasize savings, prepare for emergencies, avoid taking on debt, and invest when you can. That’s it. It’s not sexy, but it works.

Recognize the importance of cash flow. You income is important, but even more important is your cash flow. If you earn a million dollars in a year and spend it all, where does it get you? Nowhere. Were you able to save anything? Can you handle an emergency if it arises? You can more easily live on a lower salary if you keep your fixed expenses low. Eliminating your debts frees up additional cash flow which can be used for the more important things in life, such as buying a home, taking a vacation, planning for college, or retirement saving.

More money is not the only solution

Yes, it is true that having more money can solve some financial problems. If you are in debt and struggling, more money will help you clear the debt and get back on your feet. If you are living paycheck to paycheck, then a higher salary might help you finally get ahead of the curve, first saving a month of salary, then two, and so on. But by itself, more money is not the solution. You still need to reign in your expenses and live within your means, otherwise you will find yourself back where you started: harboring the belief that more money can fix your money problems.

The bottom line is this: if you spend more than you earn, you will never get out of debt and you will never be financially free.

Published or updated March 13, 2013.
Print or e-mail this article:

{ 6 comments… read them below or add one }

1 krantcents

I earned considerably more than do now and it seemed the expenses were equally high. They were not out of control, but higher. I never spent more than I earned and never had debt other than a mortgage. At this time in my life (near reirement again), I keep it simple, save a lot and keep a low profile lifestyle.


2 Lizzy

After reading just the title I said “Yes, more money would solve our problems” after reading your post I now say “Yes, more money would solve our problems” We are both savers and we have no debt except for our mortgage. After starting our own company in January and having a baby in March our savings was almost gone (we only had $1500 left). Our company is doing good our estimated income is $38000, with other income from renting half our dublex, selling things and giving haircuts we are looking at $3300 a month after taxes. Our required expenses are $2300 a month (church, home, insurance, utilities) that leaves $1000 a month for everything else. Somehow we have gotten our savings back up to $2700, but it’s going to take a long time to save up 3 months of expenses. So yes, more money would be great.


3 Ryan

Thanks for sharing, Lizzy. The point isn’t to say that more money wouldn’t help – because more money would help just about anyone. The idea is to follow good money habits. So it’s a two point effort – earn more, and apply the right money management skills.


4 Bernard

I honestly believe that more money won’t solve your money problems…if you have problems surrounding the subject of money. I think more money will only magnify your relationship with it.

If you’re greedy, more money will show that you are greedy. If you’re a giver, more money will display how charitable you are. If you are smart with money, more money will just make you wealthier.

More money can’t solve the problem if the problem is with the person…


5 Terry

I live on a poverty level income, I’m confident more money would help a lot..


6 Ryan Guina

Terry, more money will certainly help many people. But for others, more money doesn’t solve anything. It just allows them to continue spending beyond their means. They just end up with nicer toys or more stuff. For the former group, more income will help solve many issues. For the first latter group of people, money management is the only solution.


Leave a Comment

Previous post:

Next post: